The market is pretty volatile these few months. A speech by Jerome Powell tanked the S&P500 by -3.37% in a day. Some financial YouTubers are calling for doom and gloom, while others are saying to buy the dip. It’s the era of information overload.
Here’s what I know.
Consumer Price Index
The Fed will keep raising interest rates until the CPI (consumer price index) is down. The July CPI stands at 8.5%. Personally, I use this site https://app.truflation.com/ to keep me up to date on the inflation rate. CPI is a lagging indicator. So what I am looking for is a down trend on the chart. At the moment, it does seem to look like it is starting to trend down.
Quantitative Tightening
The chart below shows how much money has been added to the money supply since the 2020 Quantitative Easing (QE).
We know that the Feds is going to/has started Quantitative Tightening (QT). We can see that there is a slight decline in the money supply since Mar 2022.
Personally, I think that it is going to be so difficult to bring the money supply back to pre 2020 level. Have you tried giving candy to a toddler, and then try to take it back? Just that in this scenario, try taking it back from an entire nation.
The US also recently introduced the Inflation Reduction Act to help reduce inflation. But is the Act actually reducing inflation or spending more money? Check out this video from Minority Mindset, where he explain in detail what the act is. If you don’t want to watch the entire video, you can fast forward to the 20:40 mark, when he summaries the different provisions of the act.
How do I invest in such volatile times?
I have a very boring textbook answer which is to dollar cost average (DCA) regardless of what the market is doing. As long as you are investing for the long term on a broad based index fund, this volatility shouldn’t affect the plan that you have already made.
I am still investing every month using Endowus, Autowealth and BCIP. All about automating my investments without emotions especially during this period. (Check out my lazy post about automating everything)
I also have a stash of cash that I’m holding till Sep to see where we are with the CPI, before buying any dips.
As for my crypto investment, I am still sitting with a lot of USDC. I am still uncertain about buying more into ETH, BTC or any Alts. With no new money coming into the crypto space, I just can’t see it going to an all time high again. And without proper use cases, it is hard to generate value out of these coins.
I do believe in blockchain technology. But with the coins, you have to remember, that these are created out of thin air. When you buy a stock like Apple, you know that there is a company behind it that is generating revenues. But for ETH and BTC, where is the revenue? So I am taking a more wait and see attitude before throwing my money back into crypto.
Lastly, if you are curious, you can view my current portfolio here.
As always, None of the content that I write on this site should be taken as financial advice.